1. Field of the Invention
The present invention relates to a payment system and method of processing payment authorization requests for payment transactions to be conducted via a data communications network, and is particularly, but not exclusively, suited to payment authorization requests being conducted as a result of orders by financial account holders via a plurality of different online merchant systems.
2. Description of the Related Technology
Users are increasingly encouraged to purchase goods online, i.e. via the Internet and associated technologies. Generally speaking, existing online payment systems fall into one of four types of arrangement: in a first type of arrangement, an online merchant system collects payment details from a financial instrument holder, otherwise known as a buyer or cardholders without the buyer dealing directly with any other entity that may be involved in the transaction, and the online merchant system sends the transaction details directly to their acquiring bank system. In a second type of arrangement, the online merchant system collects payment details from a buyer without the buyer dealing directly with any other entity that may be involved in the transaction, and the online merchant system sends the transaction details to a online merchant Internet Payment Service Provider (merchant IPSP system) which processes payment authorizations on behalf of the merchant. The merchant IPSP system subsequently transmits the details to the online merchant's acquiring bank system; the details may be transmitted directly to the acquiring bank or to a payment processor which acts on behalf of the acquiring bank. Examples of merchant IPSP systems which provide support for this second type of arrangement include the Protx™ Veri-Secure Payment system (VSP).
An advantage of using a payment gateway such as the afore-mentioned merchant IPSP system is that the merchant IPSP system can provide one or more additional various transaction processing functions, for example settlement, handling of chargebacks, handling of refunds, and transaction reporting, on behalf of the online merchant. In the settlement procedure, the merchant IPSP system submits all the online merchant's approved authorizations collected over a given period, in a “batch”, to the online merchant's acquiring bank system for settlement. A chargeback is a reversal of a payment card transaction initiated by the buyer or the bank that issued the card used in the purchase. This differs from a refund, which is agreed to and initiated by the online merchant, via the merchant IPSP system. Transaction reporting involves providing an overview reporting function for accumulated transactions which have been authorized and optionally settled via the merchant IPSP system, so that a merchant can for example select a date range and see an overview relating to all transactions conducted within the selected date range. A merchant IPSP system may provide an online merchant with a secure online website whereby to approve chargebacks, initiate refunds and/or view transaction reports as described.
In a third type of arrangement the online merchant system redirects the buyer to an alternative payment system website with which the buyer interacts in order to complete the transaction. The alternative payment system interacts directly with the user who provides payment to the alternative payment system either directly from their bank account or via a mechanism such as a payment card. Where a payment card from a conventional payment scheme is used the alternative payment system performs the role of the merchant in the conventional payment system, submitting a payment demand through an acquiring system. Payment from the user is made to the alternative payment system. The alternative payment system is then responsible for any reimbursement of the merchant. In a second case, the alternative payment system can, in effect, behave as a conventional clearing house, funding a user's account within the alternative payment system from the user's actual issuing bank account by directly debiting their account. The alternative payment system subsequently ensures payment is sent to the merchant's issuing bank account, usually through a conventional clearing house. This merchant bank account may or may not be the same as their account held with their conventional acquiring system. Thus most of the time payment systems of the third type act as the intermediary to take actual funds from the user and pass them to the merchant, most usually via the consumer's and merchant's individual bank accounts, potentially holding on to those funds as they pass through accounts held by the payment system; an example of this third type of payment system includes the well known PayPal™ payment system. Such a payment system may also have the capability to operate as a conventional IPSP, for example by providing associated online payment handling services.
Whilst this type of payment system relieves the need for the user to set up individual payment accounts on a per online merchant basis, the user has a relationship with the alternative payment system and not with the online merchant system; this gives rise to several notable disadvantages: firstly the online merchant neither receives payment directly from an acquiring bank nor can avail itself of a payment-scheme based guarantee of payment, because for these transactions there is no direct relationship between the merchant and a card payment scheme. Secondly, for transactions effected via card payment the buyer does not have visibility of the individual online merchant from whom the product was bought (instead the card statement identifies the alternative payment system entity). Thirdly, the buyer is not protected by the card scheme's rules and may not be protected by any applicable consumer protection because the transaction is with the payment system, and not with the online merchant system
When the user interacts solely with the merchant system, the merchant system typically obtains payment card data, bank account information and/or other financial data from the buyer. The merchant then passes this information either directly or via a payment gateway provided by a merchant IPSP system, to an acquiring bank processing system. Each merchant system is assigned a merchant account identifier by an acquiring bank, and this account identifier is used to identify the merchant to the acquiring bank when requesting authorization of a transaction. This requires each merchant system to implement its own payment processing capability, isolated from other merchants; as a result a buyer is required to provide their payment information separately for each merchant. Thus, for each new merchant that a buyer interacts with, the risk of exposure, misappropriation and/or fraudulent use of the buyer's financial data increases.
These known payment systems require that the user enters their account details on a per transaction basis or upon registration with the merchant IPSP, or alternative, non-IPSP, payment system; thus the user is the sole point of contact for procuring the relevant payment details. Whilst this is an accepted approach, account identifiers tend to be difficult to remember, and as a result users can generally only make purchases and/or sign up to payment services and merchant sites when they have their account details with them at the relevant point in time.
In a fourth type of arrangement of a payment system, an additional option is provided whereby a buyer is able to select to proceed to payment via their issuing bank, which provides an online banking website for such purposes. However, in this case the online merchant, or the merchant IPSP system acting on their behalf, needs to interface with the issuing bank system and moreover, the payment process, once transferred to the issuing bank, proceeds as a bill-payment type transfer directly from the user's transactional account (i.e. a current account or checking account) held by the issuing bank system. Hence, the fourth type or arrangement is not capable of providing the transaction processing functions available from existing merchant IPSP systems or from existing card scheme systems (such as Visa™ and Mastercard™).